6 things to consider when choosing your first car

Buying your first car is a big step, and is an exciting milestone to reach. But if you get too carried away or jump the gun on your purchase, you could buy a car you can’t afford or could end up with one that doesn’t actually suit you very well.

Here are six key things to consider before buying your first car.

What’s your budget?

A car is a major purchase, so going beyond what you can afford is one of the worst mistakes you can make. Comb through your monthly expenses and savings in order to set yourself a maximum spending limit and make sure you don’t go beyond it. Seek car loan pre-approval if necessary in order to work out the maximum amount a lender will loan you, or work out your maximum potential repayments with a car loan repayment calculator.

As well as considering the purchase price of the car and the loan repayments, you also need to factor in all the extra upfront and ongoing costs associated with buying a car, like:

• Dealer delivery fees;

• Stamp duty on the purchase;

• The cost of CTP (compulsory third-party insurance);

• Comprehensive car insurance;

• The cost of fuel;

• The cost of regular maintenance; and

• Depreciation.

According to the Australian Automobile Association’s (AAA) Transport Affordability Index, all of these costs combined can result in you paying well over $10,000 per year for medium cars, while small cars can cost around $8,000. Could you afford that?

Are you going new or used?

Cars can either be brand new or used, and depending on your needs and budget, one could be the better choice for you. New cars are obviously flasher, will have newer technologies and accessories, will generally have a higher safety rating and will come with warranties. You might also be able to pay less for car insurance, as newer cars are often seen as less of a risk.

All of this obviously comes with the tradeoff of new cars being more expensive as a whole and can depreciate in value very quickly right out of the dealership.

Used cars, on the other hand, tend to be much cheaper, as cars are a rapidly depreciating asset. They also don’t have to be broken down bombs - a used car is simply defined as a car that has been owned before, so a relatively new looking one-year-old car could be considered used, resulting in a bargain.

The downside of used cars is that they could be an older model with worse safety and comfort features, and they could also be more prone to maintenance and servicing, costing you more in the long run.

Buying used car can be a more cost-effective way to buy a relatively recent model cheaply, especially if you’re on a lower budget. Buying a new car will cost more money, but can grant you access to the latest models and features and will involve less checking on your behalf.

What type of car do you need?

There’s a whole host of questions you need to ask yourself about the type of car that will best suit your needs, and answering as many of these questions as you can will help you narrow your search:

• Do you want a manual or automatic car?

• How many seats do you need? 2? 5? 7?

• How often do you drive the car? Just short trips on weekends? Daily commutes to work? Long weekend drives?

• How long do you need the car for? Are you going to upgrade in a few years, or hang onto it until it dies?

• Do you want a car with a five-star safety rating?

• Do you want a car with useful features like Bluetooth, reversing cameras, heated seats etc?

• Do you need a car that you don’t mind storing outside, or are you keeping it undercover?

• How fuel-efficient is the car? More fuel-efficient models can save money over time.

• How green is the car? If you’re concerned about the environment, consider a car with lower CO2 emissions.

You should also consider whether you want a big car, a mid-sized car like an SUV, or a smaller car. You don’t want to commit to buying a car only to realise it doesn’t meet your criteria. Check as many things off your list as you can before you buy.

Be aware of dealer add-ons

When buying a car from a dealer, they might try and convince you to buy some add-ons with your purchase. They might say these are a good deal, but many of them are actually duds, and can not actually provide much value, work as they’re supposed to or can be bought for less after you buy the car (called ‘aftermarket accessories’).

In our article ‘5 car add-ons you can avoid’, some of the add-ons that generally represent the worst value for money include:

• Bundled insurance;

• Extended warranty;

• Rustproofing;

• Dealer tinting;

• Towbars and roof racks

Try to avoid being smooth-talked into buying these accessories if you don’t need them.

Shop around and do your homework

Don’t buy the first car you lay eyes on. Take some time to compare lots of different models that meet your criteria online, using sites like Carsales.com.au or Georgie, and find one that represents the best value to you (not necessarily the cheapest).

Ask your dealer if you can take it for a test drive, and don’t be afraid to walk away if you feel they’re asking for too much. Suggest a reasonable amount for the car below the advertised price, and you could save yourself a couple of thousand dollars.

How are you going to finance it?

Unless you have the cash to pay for the whole car, chances are you’re going to need financing to fund your purchase. If this is the case, then check out some of loans.com.au’s car loans, which offer some of the most competitive interest rates on the market.

Buying a car is a serious purchase, which is why getting the most out of your car loan is essential. A good car loan with a low rate could result in hundreds of dollars a year in savings, so why not book an appointment with one of our car lending specialists to learn more, or apply now for a car loan to get started.

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